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Financial Data and Key Metrics Changes - For Q3 fiscal year 2022, total revenues were $43.1 million, a 61% increase from $26.8 million in Q3 fiscal year 2021 [25] - Product revenues were $18 million, compared to no product revenues in the prior year, driven by module sales to Korea Fuel Cell Company [26] - Service agreement revenues decreased by 37% to $9 million, while generation revenues increased by 75% to $10.9 million [27] - The net loss for Q3 fiscal year 2022 was $29 million, compared to a net loss of $12 million in Q3 fiscal year 2021 [31] Business Line Data and Key Metrics Changes - Product sales returned to the revenue mix with orders for 20 modules from Korea Fuel Cell, with 12 modules delivered in Q3 [9][12] - Service agreement revenues decreased due to fewer module exchanges and maintenance activities [27] - Generation revenues included an increase from renewable energy credits, contributing approximately $1.7 million [28] Market Data and Key Metrics Changes - The company is focusing on expanding in Asian markets, particularly South Korea, where the government has announced a hydrogen economy roadmap [20] - The company has established a memorandum of understanding with TuNur Ltd. to deliver low carbon electricity and hydrogen to North Africa and Europe [20] Company Strategy and Development Direction - The company aims to decarbonize power, produce hydrogen, and utilize hydrogen as a clean energy fuel [10] - The strategic focus includes scaling operations, enhancing manufacturing capabilities, and investing in research and development [41][39] - The company is committed to achieving net zero emissions by 2030 and aligning with UN Climate Action goals [43] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism regarding the impact of the Inflation Reduction Act on long-term market and tax certainty for investments [21] - The company anticipates growth in recurring revenues as projects begin operation under long-term power purchase agreements [39] - Management highlighted strong demand for grid resiliency and reliability, particularly in light of the energy crisis in Europe [55] Other Important Information - The company reported a backlog of $1.284 billion, slightly down year-over-year, with product sales backlog increasing due to module orders [33] - As of July 31, 2022, the company had approximately $479.6 million in cash and cash equivalents [34] Q&A Session Summary Question: Can you talk about the incremental production capacity? - Management discussed strategic actions to integrate carbonate manufacturing capabilities and optimize operations to achieve increased capacity [46][47] Question: Can you talk about supply chain optimization efforts? - Management confirmed ongoing efforts to strengthen the supply chain and expand manufacturing footprint to meet global growth demand [49][50] Question: Can you provide more details on the Groton project challenges? - Management clarified that the challenges are unique to the Groton project and that confidence remains high for resolving issues within a year [52] Question: Any updates on product sales for new customers? - Management noted strong momentum in building the pipeline, particularly in Korea and Europe, driven by the push towards hydrogen [54][55] Question: Can you elaborate on the MOU with KEPCO? - Management explained that the MOU with KEPCO focuses on developing large-scale utility projects in South Korea, leveraging the company's unique capabilities [59] Question: What is the outlook for product momentum in the U.S.? - Management expressed optimism for product momentum in the U.S., particularly in carbon capture and separation technologies [63][65]

PART I - FINANCIAL INFORMATION [Item 1. Financial Statements](index=3&type=section&id=Item%201%2E%20Financial%20Statements%2E) The financial statements detail the company's financial position as of July 31, 2022, and performance for the three and nine months then ended [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) Total assets increased to **$944.4 million** as of July 31, 2022, driven by cash, inventories, and project assets Consolidated Balance Sheet Highlights (in thousands) | Account | July 31, 2022 | October 31, 2021 | | :--- | :--- | :--- | | **Total current assets** | $579,533 | $543,386 | | **Total assets** | $944,422 | $875,248 | | **Total current liabilities** | $80,514 | $52,770 | | **Total liabilities** | $184,755 | $169,923 | | **Total equity** | $696,780 | $642,438 | [Consolidated Statements of Operations and Comprehensive Loss](index=4&type=section&id=Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) Revenues grew significantly, but net loss attributable to common stockholders widened for both periods Statement of Operations - Three Months Ended July 31 (in thousands, except per share) | Metric | 2022 | 2021 | | :--- | :--- | :--- | | **Total revenues** | $43,104 | $26,820 | | **Gross (loss) profit** | $(4,180) | $1,100 | | **Loss from operations** | $(27,997) | $(10,585) | | **Net loss attributable to common stockholders** | $(30,214) | $(12,797) | | **Loss per share** | $(0.08) | $(0.04) | Statement of Operations - Nine Months Ended July 31 (in thousands, except per share) | Metric | 2022 | 2021 | | :--- | :--- | :--- | | **Total revenues** | $91,283 | $55,650 | | **Gross loss** | $(14,385) | $(7,274) | | **Loss from operations** | $(101,058) | $(42,348) | | **Net loss attributable to common stockholders** | $(102,655) | $(79,274) | | **Loss per share** | $(0.27) | $(0.24) | [Consolidated Statements of Cash Flows](index=11&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operations increased, while financing activities provided significantly less cash year-over-year Consolidated Cash Flows - Nine Months Ended July 31 (in thousands) | Cash Flow Category | 2022 | 2021 | | :--- | :--- | :--- | | **Net cash used in operating activities** | $(88,088) | $(60,585) | | **Net cash used in investing activities** | $(39,483) | $(44,208) | | **Net cash provided by financing activities** | $147,323 | $406,769 | | **Net increase in cash and restricted cash** | $19,426 | $301,968 | [Notes to Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Detailed notes cover accounting policies, liquidity, revenue recognition, project assets, and debt obligations - The company believes its unrestricted cash, expected receipts, and release of restricted cash will be **sufficient to meet obligations for at least one year** from the financial statement issuance date[37](index=37&type=chunk) - A settlement with POSCO Energy led to the recharacterization of **$22.2 million** in deferred license revenue to a customer deposit and established a new revenue stream from module sales to KFC[65](index=65&type=chunk)[68](index=68&type=chunk)[69](index=69&type=chunk) - The company recorded charges of **$14.0 million** for the nine months ended July 31, 2022, related to the Toyota project, as a potential source of renewable natural gas was no longer considered probable[85](index=85&type=chunk)[132](index=132&type=chunk) - A new at-the-market offering program initiated in July 2022 sold approximately **18.5 million shares**, raising net proceeds of approximately **$27.2 million** during the quarter, with an additional **$38.4 million** received in August 2022[34](index=34&type=chunk)[102](index=102&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=51&type=section&id=Item%202%2E%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations%2E) Revenue growth was driven by product sales, but gross loss widened due to project costs and increased operating expenses [Results of Operations](index=54&type=section&id=Results%20of%20Operations) Revenues increased significantly due to product sales, but gross margin turned negative, and operating expenses rose sharply Revenue by Segment - Three Months Ended July 31 (in thousands) | Segment | 2022 | 2021 | Change (%) | | :--- | :--- | :--- | :--- | | Product | $18,000 | $0 | N/A | | Service | $9,049 | $14,344 | (37)% | | Generation | $10,877 | $6,230 | 75% | | Advanced Technologies | $5,178 | $6,246 | (17)% | | **Total Revenues** | **$43,104** | **$26,820** | **61%** | Gross (Loss) Profit by Segment - Three Months Ended July 31 (in thousands) | Segment | 2022 | 2021 | | :--- | :--- | :--- | | Product | $81 | $(1,903) | | Service | $1,331 | $1,318 | | Generation | $(7,259) | $(498) | | Advanced Technologies | $1,667 | $2,183 | | **Total Gross (Loss) Profit** | **$(4,180)** | **$1,100** | - Operating expenses for Q3 2022 increased to **$23.8 million** from **$11.7 million** in Q3 2021, driven by accelerated investment in solid oxide and carbon capture platforms[11](index=11&type=chunk)[193](index=193&type=chunk)[197](index=197&type=chunk) [Liquidity and Capital Resources](index=73&type=section&id=Liquidity%20and%20Capital%20Resources) Unrestricted cash totaled **$456.5 million**, with liquidity supported by equity offerings and project development plans - As of July 31, 2022, unrestricted cash and cash equivalents totaled **$456.5 million**[243](index=243&type=chunk) - Total backlog as of July 31, 2022, was **$1.28 billion**, a slight decrease from **$1.30 billion** as of July 31, 2021[267](index=267&type=chunk)[268](index=268&type=chunk) - The company forecasts project asset expenditures for fiscal 2022 to be between **$40.0 million** and **$60.0 million**[278](index=278&type=chunk) - Capital expenditures for fiscal 2022 are expected to range from **$20.0 million** to **$30.0 million**, focused on expanding molten carbonate and solid oxide production capacity[283](index=283&type=chunk) - Company-funded R&D expenditures for fiscal 2022 are expected to be between **$30.0 million** and **$40.0 million** to accelerate commercialization of Advanced Technologies solutions[284](index=284&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=96&type=section&id=Item%203%2E%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk%2E) The company faces market risks, primarily fuel price exposure for projects without pass-through mechanisms - The company has significant fuel price exposure for three projects in development: the Toyota project (RNG) and two Derby, CT projects (natural gas)[330](index=330&type=chunk) Fuel Price Sensitivity Analysis (Annual Impact) | Fuel Type | Price Change | Cost Impact | | :--- | :--- | :--- | | Natural Gas | +$1 / MMBTu | ~$1.4 million | | Renewable Natural Gas (RNG) | +$10 / MMBTu | ~$2.0 million | - The company utilizes an interest rate swap to fix the rate on its BFC Credit Agreement at **5.09%**, mitigating exposure to floating LIBOR rates[325](index=325&type=chunk) [Controls and Procedures](index=98&type=section&id=Item%204%2E%20Controls%20and%20Procedures%2E) Disclosure controls and procedures were effective as of July 31, 2022, with no material changes in internal controls - The Company's principal executive officer and principal financial officer concluded that disclosure controls and procedures were effective as of the end of the reporting period[333](index=333&type=chunk) - No material changes to internal control over financial reporting occurred during the last fiscal quarter[334](index=334&type=chunk) PART II - OTHER INFORMATION [Legal Proceedings](index=100&type=section&id=Item%201%2E%20Legal%20Proceedings%2E) Major legal disputes with POSCO Energy and KFC were resolved, granting direct market access and new module orders - On December 20, 2021, the Company entered into a Settlement Agreement with POSCO Energy and KFC, resolving all major legal disputes and arbitrations[347](index=347&type=chunk) - The settlement amends the license agreements, granting FuelCell Energy exclusive rights in Korea and Asia, while PE Group retains a limited 'Right to Service License' for existing customers[351](index=351&type=chunk) - As part of the settlement, KFC committed to purchasing **20 SureSource 3000 modules** at **$3.0 million** each and has an option for **14 more**[352](index=352&type=chunk) - The company paid its counsel, Wiley Rein, LLP, a total of **$24.0 million** to satisfy all obligations under its contingency-based engagement letter for the POSCO litigation[360](index=360&type=chunk) [Risk Factors](index=108&type=section&id=Item%201A%2E%20Risk%20Factors%2E) No material changes to previously disclosed risk factors in the 2021 Annual Report on Form 10-K - There have been no material changes to the risk factors previously disclosed in the 2021 Annual Report on Form 10-K[364](index=364&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=108&type=section&id=Item%202%2E%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds%2E) No unregistered equity sales occurred; common stock repurchases were for tax withholding on employee awards Common Stock Repurchases (Q3 FY2022) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | May 1, 2022 – May 31, 2022 | 752 | $3.85 | | **Total** | **752** | **$3.85** | - Share repurchases were made to satisfy statutory tax withholding obligations for employees in connection with vesting stock-based awards[364](index=364&type=chunk) [Defaults Upon Senior Securities](index=108&type=section&id=Item%203%2E%20Defaults%20Upon%20Senior%20Securities%2E) None - None[365](index=365&type=chunk) [Mine Safety Disclosures](index=108&type=section&id=Item%204%2E%20Mine%20Safety%20Disclosures%2E) None - None[365](index=365&type=chunk) [Other Information](index=108&type=section&id=Item%205%2E%20Other%20Information%2E) None - None[366](index=366&type=chunk) [Exhibits](index=109&type=section&id=Item%206%2E%20Exhibits%2E) This section lists exhibits filed with the Form 10-Q, including certifications and XBRL data files